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Gap Me – Daily Stock Market Setup – May 18, 2020

Gaps have become a way of life on the New York stock market. With 24 hour algo trading, the regular market hours in New York have become just a minor link in the chain.

Stock Market Trading Setup for Tuesday, May 18, 2020

S&P Futures Daily Chart 

Liquidity moves markets!

Follow the money. Find the profits! 

The ES futures were up 70 at 2918 at 8:00 AM in New York.That’s up 110 from where they were this time on Friday.  If you are not a machine, you’d better be able to stay up all night.  

They have traded in a range of 2865 to 2919 overnight and this morning. They face resistance at the top of a slightly descending range channel at 2922. If they clear that, the path to test the high at 2967 will be wide open. 

On the chance that this reverses, the market would be just as thin on the way down. There is no obvious support above 2860, with the next level below that at 2800.

Daily S&P ES Chart

The daily oscillators tuned to an 8 week cycle are still mixed, befitting the 4 week trading range. There’s no sign of a breakout either way yet. But a big move is probably coming, once the range breaks.

Rate of Change continues moving sideways near the zero line. Upturns from around the zero line are normally very bullish. Likewise, downturns from this level are typically very bearish.

MACD tuned to the same cycle has been moving sideways above the level reached in the Q4-Q1 advance. This signifies that the market is in trending mode. This indicator stayed near this level for 3 months before the market topped out back in February. I wouldn’t get bearish until this turns down and price breaks support.   

Again, this is for the perspective of one day only. The purpose of these reports is not to divine the longer term. If you want longer horizons, I cover that in the Technical Trader service at Lee Adler’s Liquidity Trader. 

Hourly ES S&P 500 Futures Chart

It’s still all noise all the time until they break out of the 2825-2945 range. The market is extremely thin within the range. Lots of fireworks.

The 5 day cycle upside projection is 2945-50.

Momentum, True Strength, and MACD tuned to a 5 day cycle are very bullish.

Reminder- I’m only talking patterns for a day here. This is not the big picture. If you want that story, you must subscribe. Risk free trial and all.

Join me on the message board today and I will update you there occasionally during the day. Feel free to join the “fun.”

Meanwhile, here are the latest reports from Lee Adler’s Liquidity Trader.

Here’s What to Look For In Market Fraught With Uncertainty

The market has now been rangebound for 5 weeks, leaving the cycle picture muddled. Wave amplitude remains relatively high, while frequency has increased. If the recent pattern holds, the market would top out on Thursday. But what if it doesn’t cooperate. Here’s what to look for to signal what comes next.

Technical Trader subscribers, click here to download the report.

Not a subscriber? Try Lee Adler’s Technical Trader risk free for 90 days!  

Treasury Issuance Catches Up With QE and That’s Not Good

Treasury issuance has caught up with QE. There are no more excess funds lying around for dealers to use to mark up stock and bond prices. The balance has shifted. It’s not as bullish as it was, that’s for sure. And it could get much, much worse in the weeks ahead before the Fed reacts.

Subscribers, click here to download the report

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Federal Withholding Tax Collections Chart

You Have No Idea How Bad This Really Is

In normal times, the Federal Government has a revenue windfall in April, and runs a large surplus for the month. Revenues are typically at least 140% of outlays. Even more in good years.

Revenues covered just 24% of outlays in April. We borrowed 76 cents of every dollar the Federal Government spent last month.

We knew this was coming. The questions now are how long it can last, when it will start to recover, and whether it might get worse.

The monthly Treasury Statement data illustrates the depth of the budgetary crisis that have engulfed the financial markets. It showed that the Federal Government had to finance a deficit of $742 billion for the month. But that apparently doesn’t include a little cash flow matter of $230 billion the government paid out in tax refunds in April. That’s a gargantuan number that we saw in the Daily Treasury Statement data that I reported last week. Therefore on a cash basis, the deficit was more than a trillion. That had to be financed through debt offerings.

The Daily Treasury Statement data through May 12 shows that the situation is not only not getting better. It hasn’t stopped getting worse. The worst readings on withholding tax collections just happened Friday and Monday. Here’s how it looks now, and guidance on how we’ll know when it’s beginning to recover.

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Get this report and access to past reports.  Read Lee Adler’s Liquidity Trader risk free for 90 days!

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Lee Adler

I’ve been publishing The Wall Street Examiner and its predecessor since October 2000. I also publish, and was lead analyst for Sure Money Investor, of blessed memory. I developed David Stockman's Contra Corner for Mr. Stockman. I’ve had a wide variety of finance related jobs since 1972, including a stint on Wall Street in both sales, analytical, and trading capacities. Prior to starting the Wall Street Examiner I was a commercial real estate appraiser in Florida for 15 years. I was considered an expert in the analysis of failed properties that ended up in the hands of bank REO divisions, the FDIC, and the RTC. Remember those guys? I also worked in the residential mortgage and real estate businesses in parts of the 1970s and 80s. I have been charting stocks and markets and doing analytical work since I was a teenager. I'm not some Ivory Tower academic, Wall Street guy. My perspective comes from having my boots on the ground and in the trenches, as a real estate broker, mortgage broker, trader, account rep, and analyst. I've watched most of the games these Wall Street wiseguys play from right up close. I know the drill from my 55 years of paying attention. And I'm happy to share that experience with you, right here. 

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